Do Kwon, co-founder of Terraform Labs, is expected to change his not guilty plea in federal court Tuesday. District Judge Paul Engelmayer scheduled the hearing after being advised that Kwon may enter a plea change.
Kwon previously pleaded not guilty to nine felony counts in January. The charges include securities fraud, market manipulation, money laundering and wire fraud related to the Terra network collapse.
The Terra ecosystem crashed in May 2022 when its algorithmic stablecoin TerraUSD lost its dollar peg. The collapse wiped out $40 billion in investor assets and destroyed the once $18 billion network in days.
Kwon was extradited to the United States in December 2024 from Montenegro. He had been detained there since March 2023 after attempting to travel on falsified documents.
His legal team fought extradition requests from both the US and South Korea for over a year. Montenegro’s courts ultimately decided to send him to American authorities rather than South Korean prosecutors.
Court filings show prosecutors and Kwon’s defense team engaged in “productive discussions” for months. The Southern District of New York’s interim US Attorney Jay Clayton heads the prosecution team.
Judge Engelmayer’s Monday order did not specify which charges Kwon might plead guilty to. The judge also did not reveal details of any potential plea agreement with prosecutors.
The court order instructed Kwon’s attorneys to review any plea agreement before Tuesday’s hearing. Kwon must be prepared to give a narrative allocution incorporating all elements of the offenses he admits to committing.
Kwon has been held without bail for approximately seven months since his January arraignment. His criminal trial had been scheduled to begin in January 2026 before this plea change development.
Kwon and Terraform Labs already faced civil consequences for the Terra collapse. The Securities and Exchange Commission found them liable for fraud in a separate case.
The civil case resulted in $4.5 billion in penalties and disgorgement orders. This included civil penalties, disgorgement fines, and prejudgment interest payments.
The plea conference comes days after another crypto case verdict in the same district. Roman Storm, co-founder of Tornado Cash, was found guilty of running an unlicensed money transmitting service.
Prosecutors said they needed to examine six terabytes of data during discovery for Kwon’s case. This massive amount of evidence contributed to the extended timeline for plea negotiations.
The Terra network once ranked among the top cryptocurrency projects by market capitalization. Its algorithmic stablecoin model was considered innovative before the spectacular collapse exposed fatal flaws.
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